Life becomes complicated for a US energy secretary who claims to be negotiating for lower oil prices with members of the Organization of Petroleum Exporting Countries. So many conflicting signals emerge from the administration he serves.
"I've been negotiating with OPEC nations to get oil prices down," Energy Sec. Bill Richardson said on May 21 in a commencement address at Boston University Law School. "And we're still working on it, so hang in there."
This no doubt comforted graduates who have watched oil-product prices rise during their last few months of school. But what should they make of the announcement, just 4 days earlier, of an Environmental Protection Agency proposal to require that nearly all sulfur be removed from diesel fuel?
Price connection
Many of them, of course, won't see the price connection. And it would serve the Clinton administration's purposes to keep things that way. Richardson jawbones foreigners on behalf of US gasoline consumers. EPA Administrator Carol M. Browner attends, however incrementally, to the health of children and the elderly. It's a cozy image: loyal soldiers of the Clinton-Gore administration, at work in their respective areas protecting people.
But there are practical problems.
For one thing, the energy secretary doesn't negotiate oil prices with OPEC. While the top energy official of the world's largest oil consumer and strongest military power certainly has influence and stature with some of them, OPEC members mainly do what suits their interests, which are often in conflict and mainly economic. It's a stretch for Richardson to claim credit for OPEC's March decision to raise production quotas in response to plummeting oil inventories and rapidly rising prices. But that doesn't stop him.
"As you can see at the pump these days," he said at a World Affairs Council Reception in San Diego May 9, "our quiet diplomacy did work. Regular gas is down 11¢/gal since last March." Quiet diplomacy hasn't kept prices from rising again since then, of course. And OPEC might well have increased production more in March and precluded current worry that it won't do so again in June if Richardson hadn't irritated members with overtures that some of them found to be not all that quiet.
Richardon's March bluster and subsequent credit-taking might not cost the US much in terms of persuasion. Oil ministers know how to distinguish between international diplomacy and domestic political grandstanding. From their perspective, however, US importunations about oil prices must be especially difficult to square with the latest addition to EPA's list of initiatives destined to raise the costs of producing vehicle fuel.
The lurch on diesel sulfur prompted this warning from National Petrochemical & Refiners Association Pres. Urvan Sternfels: "It sets a nationwide standard that the refining industry cannot meet for a new product that the fuel distribution system cannot provide at a cost that American consumers cannot afford."
To OPEC ministers, an energy secretary representing an administration willing to jeopardize refiners in such a manner, come what may to consumers, can't seem very serious when he "negotiates" for low oil prices. And the baggage of conflicting purposes doesn't come just from Browner, whose regulatory zeal only the courts can control. Richardson is creating his own.
"The climate change problem is real," Richardson told the Boston University graduates, citing current phenomena such as floods and heat waves. As OPEC members know, the next step for governments willing to think no further than that about climate change is to tax fossil energy into market submission. This is not the behavior of a government seriously concerned about the price of energy.
A plug for ethanol
Richardson's sense of purpose in the matter of consumer concern suffers further from the first item on a list of policy ideas he gave the World Affairs Council for developing new energy sources: "accelerating new ethanol plant production." Fuel ethanol solves no energy problem unless regulation obliterates superior alternatives. It exists to transfer money from taxpayers, nearly all of whom consume fuel, to big political contributors who distill grain.
From the US to OPEC, therefore, here's the message: Lower your prices for crude oil in the name of consumer interests to accommodate anticonsumer regulatory initiatives of questionable or no merit motivated principally by domestic politics.
If the next time he calls OPEC wanting to chat about oil prices nobody answers, Richardson shouldn't be surprised.
